We have one great strength, which is the strength to develop products specifically for Indian needs
AutoCar India — August 8, 2000

Group Chairman Ratan Tata's interview with Hormazd Sorabjee, editor, AutoCar India, which celebrates its first anniversary

Hormazd: Exactly a year ago we had met, if you remember, just before the first issue of the magazine was coming out. Now we are coming out with a special issue on our first anniversary and as far as our industry goes, we just had to have an interview with you in it.

Let us just start with the Indica. It is about one and half years since its launch. Did you imagine it would have the kind of success it has had? What were your expectations? What do you feel seeing all these Indicas on the road and knowing that more and more are being churned out and the car really is very much an integral part of the landscape here?

RNT: Well, obviously, I, like everyone else, totally underestimated the kind of national reaction or national feelings that were evoked at the time of the launch. I do not think any one of us was expecting that kind of response — we thought we would get bookings of some 15,000 or 20,000 cars at the time we launched it. So, the kind of response we generated was to a great extent because of the great national spirit it generated.

But, equally, I think, the response was also influenced by the first reactions to the car's appearance and what it offered — the proposition that it made to the customers. That has been very rewarding. There have been some teething troubles — the kind, I think, and I am not being defensive, any manufacturer would face, and this is our first venture in that area.

I think the main difference in TELCO today as against yesterday is that we want to listen to what is coming out of the marketplace, and the kind of problems we face rather than be in self-denial that there is nothing wrong. And I, therefore, believe that we will justify the faith and confidence that the people have put in the Indica.

You have talked about what my feelings are as I see the vehicle on the road now with an excess of 70,000 vehicles on the road. I feel a sense of great exhilaration. Every time I come up next to an Indica on the road, I want to roll my window down and tap his window and say, "How do you like it?"

HS: You do feel it is your baby.

RNT: Oh absolutely. I think, unfortunately, there does not seem to be the kind of recognition of what has gone into really producing a car from the ground up, here in India. I think that probably our competitors abroad understand and recognize that more than, perhaps, the government, the lawmakers and our dealers and possibly even our customers.

We have undertaken a very complex engineering exercise. We have gone outside where we have felt that we needed to go. We have not done a re-invent-the-wheel kind of thing. And we have come up with a contemporary vehicle. We may have made mistakes, people do do that, but I think we have come up with something of which I, as a person involved, feel very satisfied, and usually I am very critical.

HS: You know where to draw the line -- what you can do and what you cannot do. Do you think there may be a number of people -- in several quarters of your company --who want to do everything?

RNT: Oh yes, in several quarters in the company. And there are a great number of people upset when you say, no, we cannot do this, get help.

HS: So there are ego problems.

RNT: Yes, there are tremendous ego problems even today. I think that this is something we must overcome. What we have done in Telco in the recent past is bring in much more external help than we have ever had in the past. And I think that has been an eye opener for several of the people in the Engineering Research Centre—that there are people with global experience who can say on the drop of a hat: why don’t you look at this?

It is very easy to get technology for a product. If you are dealing with the component, it comes from the equipment supplier, or if you have a collaboration then it comes from the collaborator on that product. But in design and engineering, where do you go for collaborations? No one is giving you that -- ever. So when you do it, you have got to figure out that on your own. And the only way to get what you need is to go out and seek people with that experience who might help you. It is not a package deal that you can buy.

HS: Mr Tata you raised a very good point just now that probably only your global counterparts have realised the engineering task of what you have done.

RNT: And the cost.

HS: Exactly. I have also had the same experience. I meet a lot of them and you know they have shown a keen sort of interest in what you have achieved over here. Now you have talked about this in the press, you have talked about this at several of your AGMs: Do you think there is a possibility of, let us say, a global alliance eventually? With all the consolidation happening in the industry, and let’s face it with 60,000–70,000 the economies of scale are not there. So if an alliance does help you, would you be averse to it?

RNT: I have in fact publicly stated it, not only in response to a question as I am doing now. But I have come out and stated it, both in writing and verbally, that when we entered the car business, we had to be conscious that we could not be in the car market with one product -- that we cannot survive in today’s car market with one product. Nor also with just a few variants of that same platform. We need to have two additional things: we need to have a wider range of products and we need to have constant refreshing or replacement of that product. And if you consider that the India of tomorrow is going to be an open India, where you can address the Indian market from outside, then a company like Telco must ask itself how it will compete with a Toyota or a Volkswagen or another major global player who can address the market from outside with eight or ten new products, face-lifted every couple of years. And, therefore, an alliance in my view is absolutely essential for Telco.

HS: What would you look for in a partner?

RNT: Ideally, I would be looking for a global partner who may not want to devour me, who would allow the sovereignty of Telco to exist. What I would be looking for would be the swapping of products or the exchange of products, where perhaps I have access to their power trains, access to certain platforms, they have access to our platforms. Maybe over time we share the distribution outlets in India. Maybe we co-batch, maybe we have both product lines co-exist, share markets together.

You talked about economies of scale. In production we may not have that, but in engineering we certainly do. We have the greatest edge in engineering, in the economics of engineering.

HS: I was talking to a couple of guys at Ford and I was mentioning the cost of Rs 1700 crore for what you have done and they were just drooling at those costs.

RNT: And of the Rs.1700 crore, much of it is in production facilities. But if you consider that maybe only about 200 million dollars was spent on engineering and tooling, that is unheard of abroad.
One of the things I would hope that we could bring to the table in an alliance, is undertaking joint development in India for worldwide needs of that partner. It may or may not be produced in India.

This is the kind of alliance I think that would make sense for TELCO. If such an alliance partner needed to have a share in that business and did not wish to share in the other part of the company, I am quite willing to spin off the passenger car activity into a separate entity, which can be looked at on its own with TELCO being the dominant shareholder.

HS: So you do not mind giving them equity of, say, 26%, with their one guy on the board or something like that.

RNT: Sure. Where I have a problem is, where, at the very outset, someone wants to come in and take over this whole activity, or supposedly come in as an equal partner and later to devour me. So I need to look at the complexion of that partner.

HS: I think right now you are in a position of strength. I would imagine that there should be a queue outside Bombay House, of all these guys wanting to come in. In my view, someone like Volkswagen would make the perfect fit.

RNT: Well, I don’t want to conjecture on people’s names.

HS: I understand but what I am saying is that there are so many manufacturers, like Volkswagen and Renault, who have not come in. What a lot of global players would probably like to know from you is that on the terms which you have stated, you would be open to some sort of cooperation.

RNT: Absolutely. But it is an alliance where we play a role and we look to addressing the market together. Not to be devoured by a global player.

HS: You spoke of power trains, Mr Tata. Personally that is one of the areas I feel where the Indica, which is otherwise a great package, has maybe a weakness. Would you be addressing that?

RNT: We are addressing that right now. We are even looking, for the first time, at other people’s power train for the Indica and some of our other products.

HS: You would probably buy that out. But wouldn’t that add to your cost?

RNT: It may add to our cost. We may undertake to do assembly in India or go into licence manufacturing if necessary. There again it is a question of scale and the scale has to be right to have it make sense.

HS: Where do you see Telco five years from now? What is your vision for the company? It is becoming a pretty competitive marketplace. You have your strengths, and one of your main strengths is you have always understood what the Indian customer wants, whether it has been the Sierra initially or Sumo or Safari. I would honestly feel it may be the quality issues which is the main thing. But you have put your finger on the Indian consumer’s pulse in all these products. So keeping all these in mind where do you really see Telco five years from now.

RNT: It is a difficult question to answer, in the sense that the auto market in India is going through quite an evolution or a revolution just now.

HS: OK, I would change that a little bit, what role would you like to see Telco play in the auto industry amongst all the multinationals, because you are the only one who is really standing up to them.

RNT: I would imagine we would continue to play a role on the low end, and I am well aware that the multinationals can come in and buy their share of the market by subsidizing products. But I think we have one great strength, which is the strength to develop products specifically for Indian needs. I think the attraction of the Indica, or one of the attractions of the Indica, is that it is the car that has the size and presumably the applicability to the Indian scene. Therefore, I would feel that we should have a major position in the low end, we should have a position in certain niche markets, perhaps in the semi rural or semi urban markets.

HS: Your Spacio is giving the Mahindras a run for their money so I think you have definitely got some success in that market, so will we now see more of a thrust in the low end rural market with products like that?

RNT: We will. What we would now like to do is to bring some of our styling inputs into that, which we have not done so far. I think we had to first just grab a piece of that market and now we have to modernise our product in that marketplace.

So I believe we will have positions in certain segments of the market, but we cannot aspire to have a presence in all segments of the market.

HS: OK, Mr Tata, coming to yourself. You like cars so what is your kind of an ideal car ? Do you like the big American type of car with power and comfort, or some other type of car?

RNT: I have always enjoyed the American car -- not the old American car which was wallowing and soft but then they have come a long way since then in terms of suspension and rides, and now are much closer to the European car. But I like a car with a lot of power. Not that I drive fast, but I like the high torque that power provides. I love the comfort of an American car and of course I am attracted to new engineering and so some of the new European cars are extremely interesting in that sense.

HS: You had an association with Mercedes also, so obviously you must be having some kind of a liking for Merc products. Is German engineering also something that has a great appeal for you?

RNT: Oh yes. German engineering -- Mercedes and
BMW engineering -- is something that I look at a lot for detailing. Often I feel that there is some over- engineering that the market does not need but, by and large, I have always admired the engineering finesse that Mercedes put forward in their cars. I have an E-class today, an old E-class which I have been very happy with. And I am looking forward to a couple of new Mercedes', current Mercedes', which I am looking forward to experiencing.

HS: You have got such a busy schedule, more than anyone can imagine, so when do you really get time to drive?

RNT: Unfortunately, I do not get enough time to drive. Sunday is the day when I take my cars out. Unfortunately, the cars that I really like, I tend not to let my chauffeur drive, so they just lie there and the batteries get run down or the rats eat up the wires. So I have problems with them but that is the dilemma I have.

HS: You love flying and cars so is it a kind of combined thing?

RNT: It is combined, very much combined. The precision required for flying and the demands that flying makes, which you cannot really get in a car today, certainly not in Bombay; you can on a high speed highway, you can have demands on you, in terms of your attention and your driving. Certainly you cannot get that in Bombay. Flying demands that, all the time.

HS: It must be a kind of a great release and exhilaration from the pressures of work, that you are just on your own. Is there a thrill in flying?

RNT: Oh yes, there is a great thrill in flying. Ever since I have got certified on jets, it has become boring because you become a systems manager more than a pilot. So over the last two years I have got a helicopter licence and I have been flying helicopters, which again is very demanding, hands on, you’re slow, low and it demands a lot of precision. It in turn has helped me also in my flying because it demands much more than an aircraft does.

HS: One last question, Mr Tata. Just coming back to the company. Being a car person yourself, you have always wanted ‘car persons’ in your company. One is seeing a lot of change in Telco and there are younger people, more passionate people around. Is this the sort of thing that you are actually focusing on? Making it a people business because cars really are about people and their passion behind them.

RNT: Yes, very much so. In fairness, Telco has been an engineering company with people in the commercial vehicle business who have never had to drive these commercial vehicles. Unfortunately, the people who have been involved in the cars seldom had very much interest in cars. They had interest in say one element of it like suspension, transmission etc. but never really drove performance cars, never really had the opportunities to enjoy high performance cars.

Those kinds of people with those kinds of passions are very difficult to find as employees. They are usually proprietors, with high flying lifestyles, sons of rich people who do not normally work for a company. And yet there has to be an exposure but I have not quite figured out how to do it. It would be wonderful if I could find people who had a real passion for cars and who did not come from rich families, with family businesses but were willing to work in a company, to enjoy the pleasure of having to work, in a way like I do. I mean I don’t own the company but I enjoy the opportunity to work with and learn more about cars.

HS: Out of all your companies, Tata Engineering and the Indica in particular seem to be very very close to your heart. Is it born out of the fact that you basically are a car lover or was there anything else to it or did you just believe in the product?

RNT: I believed in the product. In fact I was very much involved with conceiving the initial fundamentals of the product. It is like seeing a child being born, almost limb by limb.

HS: That is what is so special about a car. I do not think you’d get a kick out of a new Taj being built in some place as much as something like this. I guess maybe that is also what’s so special or emotive about the car -- it is so powerfully aspirational.

RNT: A car is but I must say in other parts of the company, in my past incarnation with Nelco, there was the same kind of excitement when a new television set or a new hi-fi product or something that we developed came out. It is the same thing when you see a product coming together. It does not have to be a car, though a car is much more complex. I would get the same pleasure if we were in the aircraft business, in planes or otherwise.

HS: Would you want to get into that?

RNT: We have in fact considered that.

HS: Thanks so much.

RNT: Not at all.